By setting a projected annual retirement benefit goal for determining annual contributions, a Defined Benefit Pension Plan justifies the largest possible contribution and deduction amount (potentially far in excess of $100,000 annually). The only plan under which an individual can accrue a benefit in excess of $50,000 (2012) per year, subject to cost of living increases, or 25%. An actuarial report and an independent actuary’s certification are required. In order to utilize this strategy effectively, a participant must be a minimum of age 44.
Utilizes a benefit goal for determining the annual contribution with a $50,000 (2012) and annual addition limitation or the lesser of 25% of annual compensation, without the necessity of an actuarial report or certification.
The employer commits to contribute a predetermined percentage of the participant’s pay each year up to a maximum of the lesser of 25% of annual compensation or $50,000 (2012). As with other defined contribution plans, this plan may be structured with a tiered benefit formula based upon job classification and age and varying levels of benefits for each classification.
A discretionarily funded Retirement Plan based upon a maximum allowable contribution of the lesser of 25% of annual compensation or $50,000 (2012). As is the case with a tiered Money Purchase Pension Plan, allocations may be based upon the Plan Sponsor providing differential benefits for employees as a function of job classification and age.
Permits an employee to elect to defer part of his/her compensation into earmarked qualified retirement tax deferred accounts up to a maximum allowable annual deferral of $17,000 (2012), subject to periodic cost of living adjustments thereafter. The employer has the discretion to make 401(k) matching contributions at a certain percentage of the employee deferral amount. For those participants who attain age 50 or greater in any particular Plan Year, there is an option to defer an additional $5,500 (2012) assuming the maximum allowable amount has been deferred.
A Defined Contribution Plan, which utilizes employer stock as contributory trust assets with a 25% of annual compensation limit for contributions and deductions.
A Simplified Employee Pension funded into individual retirement accounts with a 25% of annual compensation limit for contributions with equivalent ratio allocations of contributions.
A Savings Incentive Match Plan for Employees that allows employees to make elective contributions up to a maximum of $13,000 or 100% of annual compensation and requires employers to make matching or non-elective contributions.